Inco given a month to decide on royalty payments
Inco given a month to decide on royalty payments
Leony Aurora, The Jakarta Post, Jakarta
The government has demanded that PT International Nickel
Indonesia (Inco) double its royalty payments in return for a
permit to boost output by 25 percent in 2009, giving the nickel
producer a month to decide its stance.
Inco should double its royalties if nickel prices rise to
higher than US$3.5 per pound, said the Ministry of Energy and
Mineral Resources' director general of geology and mineral
resources Simon Sembiring on Tuesday.
"The higher royalty applies only to the additional output," he
said.
The Indonesian unit of the world's second largest mining firm,
Inco Ltd., is seeking to up the production of its giant mine in
Soroako, South Sulawesi, from the current 160 million pounds of
nickel in matte to 200 million pounds by 2009.
The higher royalty is the only remaining snag for Inco in
securing the permit to mine more nickel. The other issues
discussed -- including community development programs, power
generation and dam construction -- have already been resolved.
"We will not give (Inco) the permit to increase production if
it refuses to meet our terms," said Simon.
"We'll give it one month to decide."
Inco has offered to give an additional 1 percent of profits
for 10 years to community development programs.
At present, the company prefers this option to doubling
royalties, said Inco's director for government relations Sri
Kuncoro in a telephone interview.
"I can't say much. We are negotiating with the government," he
said.
According to Kuncoro, when Inco's contract was revised in
1996, the nickel miner had agreed to pay a royalty of $78 per ton
after 2008. Media reports show the company pays the government
0.015 percent for every kilogram of nickel sold.
According to the company's website, in 2009 Inco is set to
contribute $9 million in royalties and $5 million in water levies
and land rent to the central and local administrations.
Inco owns the rights to mine two other areas, namely Bahodopi
in Central Sulawesi and Pomalaa in Southeast Sulawesi. However,
these areas have not been developed.
To support the expansion in Soroako, the firm wants to build a
350-megawatt hydro power plant in Karebbe, South Sulawesi, with
an estimated investment of $280 million.
Nickel prices surged last year as demand from producers of
stainless steel and other alloys in China grew. In 2004, nickel
averaged $4.88 a pound, up 51 percent from an average of $3.23
per pound in 2003, based on the benchmark prices at the London
Metal Exchange.
Inco's net profits rose to $265.1 million in 2004, from $104.2
million the year before, supported by a 56 percent jump in sales
revenue from $509 million in 2003 to $792.1 million last year.